A couple things come to mind on this report.
How confident are you in the ARV?
Are you using a conservative rent rate?
Is your acquisition a convential loan?
Will the rehab really take 6months?
5% would be a fantastic investment mortgage rate, however if your second was a cash out refi, the rate tends to go up. Did you confirm this?
What are your questions?
Hi @Henry Wells ,
That deal looks okay - not great, not bad. 8% return on your investment is a solid return, though most investors on this forum will say 10% is the target. Sometimes you are just not going to be able to get really high returns because of the market you are in. As long as you've done your research on the area and this is the best opportunity you've seen in a while, then I'd say go for it. Your estimates seem very reasonable and safe too, especially your rehab estimate, which is important. Just remember, the first year you will see a negative return because of the rehab.
@cam Schumacher I am not super confident in the ARV or the rent rates. It will be a conventional loan and I don't think the renovations will take very long. But, thats what I'm unsure of, i don't know if i a being realistic on the renovation cost's and on the loan rates. It would be beneficial to know what i can actually expect in this market to better estimate my rehab cost's and my rate of return on properties like this. Thank you for your help and advice.
@Henry Wells Your concerns are legitimate, but it's very hard to give you detailed answers, without more detailed information. Talk with your lender about rates and refi options (make sure you talk seasoning periods.) Is this an MLS deal? If so, your agent should help with ARV, rents, and a lot of those details. Is it an off-market? If so, then you need to rely on a partner or the best guess you can get.
Who do you have helping you in the purchase, rehab and lending process?
There's a lot more to analyzing a deal than the report that you shared. There are no pictures, details on the location, size of units, what your risk tolerance is, etc.
@chris lopez I am brand new at real estate investing and i am looking to by my first real investment so i am trying to get the basics of analyzing down first. I don't have too much figured out in the sense of finding a lender, I have a real estate agent that i was planning on using but she is just my families real estate agent that they've used and not too familiar with these type of investments. I have family helping me with the down payment and purchase of properties and i was an electrical contractor for a long time and have connections to other contractors to help with the rehab process. Right now my risk tolerance is fairly low as I am looking for my first real investment so i am trying to focus on figuring out how to properly analyze deals before moving forward. I greatly appreciate all of the help and would love any advice i can get. Also on a side note I believe I saw you speaking at the last ICOR event in Denver and if you will be at the next one I would love to talk to you more in person if you have time for that. For the meantime i will update my proposals with more information and continue posting them to get a better idea of what i should be looking for.
Thank you again, Henry Wells.
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